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                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of March 20, 2002
by and between Egenera, Inc., a Delaware corporation (the "Company"), and Mr.
Michael R. Thompson ("you") of 7 Woodcrest Road, Westboro, Massachusetts
01581-3623.

      The Company wishes to employ you, and you desire to be employed by the
Company, on and subject to the terms and conditions set forth in this Agreement.

      NOW, THEREFORE, the Company and you agree as follows:

      l.    Employment; Position; and Responsibilities.

            1.1   The Company hereby employs you, and you hereby accept
employment with the Company, effective as of March 15, 2002 and otherwise on and
subject to the terms and conditions set forth in this Agreement.

            1.2   You shall serve as Chief Operating Officer of the Company. You
shall, to the best of your ability, devote your full time and best efforts to
the performance of your duties hereunder and the business and affairs of the
Company and perform such duties as may be assigned to you by or on authority of
the Company's Chief Executive Officer, Chairman of the Board or its Board of
Directors, and the duties customarily associated with the office of chief
operating officer, from time to time and at such place or places as the Chief
Executive Officer, the Chairman of the Board or the Board of Directors shall
designate as appropriate or necessary in connection with your employment.

            1.3   You shall duly, punctually and faithfully perform and observe
in all material respects any and all rules and regulations that the Company may
now or shall hereafter establish governing the conduct of its business.

            1.4   You shall report directly to the Chief Executive Officer of
the Company. You shall be based in the Company's chief executive office as from
time to time established. At the date hereof, the Company's chief executive
office is located at 165 Forest Street, Marlborough, Massachusetts. You
acknowledge and agree that, in order to discharge your duties as Chief Operating
Officer and to represent the Company in its business operations, you may be
required to travel frequently, both within and without Massachusetts. In no
event will you be asked to travel without your consent for more than two weeks
at a time without home visitation and no more than 20 days per month.

      2.    Term and Termination.

            2.1   The initial term of this Agreement shall be for the period set
forth on Exhibit A annexed hereto commencing with the date hereof. Thereafter,
the term of this Agreement shall be automatically extended for successive
periods of one (1) year, unless you or the Company shall give the

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other party written notice of non-renewal at least thirty (30) days prior to the
end of the term hereof. Notwithstanding the foregoing, this Agreement and your
employment with the Company may be terminated prior to expiration of the term as
provided in Section 2.2.

            2.2   This Agreement and your employment with the Company may be
terminated prior to the expiration of the term described in Section 2.1 hereof
as follows:

                  (a)   The Company may terminate this Agreement and your
employment with the Company, by written notice to you, (i) at any time with
Cause (as defined below); or (ii) at any time without Cause upon 30 days prior
written notice to the employee.

                  (b)   You may terminate this Agreement and your employment
with the Company at any time upon 30 days prior notice to the Company.

            2.3   For purposes of this Agreement, the term "Cause" means any of
the following: (i) gross negligence or willful misconduct by you in the
performance of your duties hereunder; (ii) material refusal by you to perform or
discharge the duties or responsibilities assigned by the Chairman of the Board
or the Board of Directors of the Company (provided the same are not illegal or
unethical or materially inconsistent with the position of chief executive
officer of a corporation similar in size, scope and business to the Company) and
the failure to correct such refusal and perform such duties or responsibilities
within a reasonable period of time (but in any event no less than seven (7)
calendar days after written notice from the Company of such failure); (iii) your
conviction of a felony or misdemeanor involving moral turpitude; (iv) your
willful or prolonged absence from work not excused by a bona fide medical
disability as determined by a qualified physician mutually acceptable to both
you and the Company or other good reason as determined by the Board of Directors
in its discretion; (v) abuse by you of alcohol, drugs or controlled substances;
(vi) falseness of any material warranty or representation by you herein or in
the Invention, Confidentiality and Noncompete Agreement, dated as of the date of
this Agreement, between the Company and you, a conformed copy of which is
attached hereto as Exhibit B (the "NDA"); (vii) a material breach by you of your
obligations under the NDA; (viii) a material breach by you of your obligations
under this Agreement or any other agreement between the Company and you, and the
failure to cure such breach within seven (7) calendar days after written notice
from the Company of such breach; and (ix) your committing any act of
embezzlement, fraud or theft relating to the Company.

            2.4   In the event of any termination of your employment by the
Company without Cause, or in the event that you resign because the company has
required you to relocate more than 50 miles from 165 Forest Street, Marlboro
Massachusetts, the Company hereby agrees to provide you with Severance Benefits
as defined in Section 5 of Exhibit A hereto.

            2.5   Notwithstanding anything herein to the contrary, no expiration
or termination of this Agreement or your employment with the Company shall
relieve any party from liability for any breach of this Agreement occurring
prior to such expiration or termination.

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      3.    Compensation. You shall receive the compensation and benefits set
forth on Exhibit A ("Compensation") for all services to be rendered by you
hereunder and for your transfer of property rights to the Company from time to
time pursuant to the NDA.

      4.    Other Activities During Employment.

            4.1   Except for any outside employments and directorships currently
held by you as listed on Exhibit C, and except with the prior written consent of
the Company's Board of Directors, you will not during the term of this Agreement
undertake or engage in any other employment, occupation or business enterprise
other than one in which you are an inactive investor.

            4.2   You hereby agree that, except as disclosed on Exhibit C
hereto, during your employment hereunder, you will not, directly or indirectly,
engage (a) individually, (b) as an officer, (c) as a director or manager, (d) as
an employee, (e) as a consultant, (f) as an advisor, (g) as an agent (whether a
salesperson or otherwise), (h) as a broker, or (i) as a partner, co-venturer,
stockholder or other proprietor owning directly or indirectly more than a two
percent (2%) interest, in any firm, proprietorship, corporation, partnership,
trust, association, limited liability company or other organization or entity
which is engaged in the research, development, production, manufacture or
marketing of equipment or processes in direct competition with the Company or
any other line of business engaged in or under development by the Company (such
firm, proprietorship, corporation, partnership, trust, association, limited
liability company or other organization being hereinafter referred to as a
"Prohibited Enterprise"). Except as may be shown on Exhibit C, you hereby
represent that you are not engaged in any of the foregoing capacities (a)
through (i) in any Prohibited Enterprise.

      5.    Certain Representations and Covenants by You.

            5.1   You represent and warrant as follows: You are a United States
Citizen. Your employment by the Company will not conflict with and will not be
constrained by any prior or current employment, consulting, noncompetition,
nondisclosure or other agreement or relationship, whether oral or written. You
do not possess confidential information arising out of any such employment,
consulting, noncompetition, nondisclosure or other agreement or relationship
which, in your best judgment, would be utilized in connection with your
employment by the Company in the absence of Section 5.2.

            5.2   If, in spite of the last sentence of Section 5.1, you should
find that confidential information belonging to any other person or entity might
be usable in connection with the Company's business, you will not intentionally
disclose to the Company or use on behalf of the Company any such confidential
information; but during your employment by the Company you will use in the
performance of your duties all information which is generally known and used by
persons with training and experience comparable to your own and all information
which is common knowledge in the industry or otherwise legally in the public
domain.

      6.    Invention, Confidentiality and Noncompete Agreement. You agree to
execute, deliver and be bound by the provisions of the NDA.

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      7.    Remedies. Your obligations under the NDA and the provisions of
Sections 2.4, 2.5 and 5-16, both inclusive, of this Agreement shall survive any
expiration or termination of this Agreement or your employment (whether through
your resignation or otherwise) with the Company. You acknowledge that a remedy
at law for any breach or threatened breach by you of the provisions of the NDA
would be inadequate and you therefore agree that the Company shall be entitled
to such injunctive or other equitable relief in case of any such breach or
threatened breach.

      8.    Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or permitted assignee of the Company, neither this
Agreement nor any rights or benefits hereunder may be assigned by the Company or
by you except by operation of law. The Company's obligations and those of any
successors or permitted assignee of the Company under this Agreement, including
but not limited to the severance provisions and other compensation and benefits
due to you pursuant to Exhibit A hereto, will be a condition of and are to
remain those of any successor or permitted assignee of the Company.

      9.    Interpretation. It is the express intent of the parties that, (i) in
case any one or more of the provisions contained in this Agreement shall for any
reason be held to be excessively broad as to duration, geographical scope,
activity or subject, such provision shall be construed by limiting and reducing
it as determined by a court of competent jurisdiction, so as to be enforceable
to the extent compatible with applicable law; and (ii) in case any one or more
of the provisions contained in this Agreement cannot be so limited and reduced
and for any reason is held to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect the other provisions
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.

      10.   Notices. Any notice that the Company is required to or may desire to
give you shall be given by personal delivery, recognized overnight courier
service, email, telecopy or registered or certified mail, return receipt
requested, addressed to you at your address of record with the Company, or at
such other place as you may from time to time designate in writing. Any notice
that you are required or may desire to give to the Company hereunder shall be
given by personal delivery, recognized overnight courier service, email,
telecopy or by registered or certified mail, return receipt requested, addressed
to the Company at its principal office, or at such other office as the Company
may from time to time designate in writing. The date of actual delivery of any
notice under this Section 10 shall be deemed to be the date of delivery thereof.

      11.   Waivers. If either party should waive any breach of any provision of
this Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.

      12.   Complete Agreement; Amendments. This Agreement, including the
Exhibits hereto, and the NDA set forth the entire agreement of the parties with
respect to the subject matter hereof, superseding any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof, including but not limited to the
letter, dated February

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22, 2002, between the Company and you. Any amendment to this Agreement or waiver
by the Company of any right hereunder shall be effective only if evidenced by a
written instrument executed by the parties hereto, upon authorization of the
Company's Board of Directors.

      13.   Headings. The headings of the Sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.

      14.   Counterparts. This Agreement may be signed in two counterparts, each
of which shall be deemed an original and both of which shall together constitute
one agreement.

      15.   Choice of Law; Enforceability; Waiver of Jury Trial. You acknowledge
that a substantial portion of the Company's business is based in and directed
from the Commonwealth of Massachusetts, where the Company is headquartered and
administers all employee compensation and benefits. You also acknowledge that
during the course of your employment with the Company you have had and will
continue to have substantial contacts with Massachusetts. This Agreement shall
be deemed to have been made in the Commonwealth of Massachusetts, shall take
effect as an instrument under seal within Massachusetts, and the validity,
interpretation and performance of this Agreement shall be governed by, and
construed in accordance with, the internal law of Massachusetts, without giving
effect to conflict of law principles. Both parties further acknowledge that the
last act necessary to render this Agreement enforceable is its execution by the
Company in Massachusetts, and that the Agreement thereafter shall be maintained
in Massachusetts. Both parties agree that any action, demand, claim or
counterclaim relating to the terms and provision of this Agreement, or to its
breach, shall be commenced in Massachusetts in a court of competent
jurisdiction. Both parties further acknowledge that venue shall exclusively lie
in Massachusetts and that material witnesses and documents would be located in
Massachusetts. Both parties further agree that any action, demand, claim or
counterclaim shall be resolved by a judge alone, and both parties hereby waive
and forever renounce the right to a trial before a civil jury. In any dispute
brought by either party to enforce the company's or your rights under this
agreement, the prevailing party will be entitled to collect it's or his costs
incurred, including reasonable attorney's fees.

      16.   Advice of Separate Counsel. You acknowledge that you have been
advised to review this Agreement with your own legal counsel and other advisors
of your choosing and that prior to entering into this Agreement, you have had
the opportunity to review this Agreement with your attorney and other advisors
and have not asked (or relied upon) the Company or its counsel to represent you
in this matter.

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      IN WITNESS WHEREOF, the Company and you have executed this Agreement as of
the day and year first set forth above.

                                      EGENERA, INC.

                                      By: /s/ Thomas F. Sheehan
                                         ---------------------------------------
                                          Name:
                                          Title:

                                      /s/ Michael R. Thompson
                                      ------------------------------------------
                                      Michael R. Thompson

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                                    EXHIBIT A

                   EMPLOYMENT TERM, COMPENSATION AND BENEFITS
                             OF MICHAEL R. THOMPSON

      l.    Term. The initial term of the Agreement to which this Exhibit A is
attached and made a part shall be for a period of one (1) year from the date of
this Agreement.

      2.    Compensation; Base Salary.

            (a)   Your base salary ("Base Salary") shall at the annual rate of
Two Hundred Fifty Thousand Dollars ($250,000), payable in accordance with the
Company's payroll policies as from time to time in effect. Your Base Salary will
be reviewed annually by the Board of Directors and may be increased by the Board
in its discretion.

            (b)   In addition to your Base Salary, you will be eligible for the
following bonus for the fiscal year ending December 31, 2002 based on the amount
of bona fide 2002 Product Bookings (as defined below) received by the Company:

      -  If 2002 Product Bookings are less than $20 million, you will receive no
         bonus.

      -  If 2002 Product Bookings are $20 million, you will receive a bonus of
         $200,000.

      -  If 2002 Product Bookings are greater than $20 million and less than or
         equal to $30 million, you will receive $200,000 plus 1% of the amount
         of 2002 Product Bookings in excess of $20 million.

      -  If 2002 Product Bookings are greater than $30 million and less than or
         equal to $40 million, you will receive $200,000 plus 1.5% of the amount
         of 2002 Product Bookings in excess of $20 million.

      -  If 2002 Product Bookings are greater than $40 million, you will receive
         $200,000 plus 2.0% of the amount of 2002 Product Bookings in excess of
         $20 million.

For purposes of this Agreement, the term "2002 Product Bookings" shall mean all
hardware sales and software licensing fees (exclusive of any fees arising from
installation, maintenance, consulting or other services, whether or not relating
to hardware sold or software licensed) recognized by the Company as a result of
signed product purchase orders (together with signed General Purchase Agreements
of the Company) obtained by the Company during the fiscal year ending December
31, 2002.

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      3.    Vacation, Insurance and Benefits; Expenses; Reimbursement of
Relocation Expenses.

            (a)   You shall be entitled to all legal holidays recognized by the
Company, and fifteen (15) days paid vacation per annum, which shall accrue at a
rate of 1.25 days per month. Any unused vacation may be accrued or used in
accordance with Company policy as from time to time in effect.

            (b)   You shall be eligible for participation in any health, dental,
and other insurance plans that may be established and maintained by the Company
from time to time for its senior executives, all as determined by the Company's
Board of Directors in its sole discretion. You shall also be entitled to
participate in any employee benefit programs which the Company's Board of
Directors may establish for Company employees generally, including but not
limited to health insurance and stock purchase or option plans. At the date
hereof, the benefits to which you will be entitled include: BlueCross/BlueShield
health insurance with the option of HMO or PPO, premium 80% employer-paid; Delta
Dental Insurance allowing for care from any dentist or specialist, including
orthodontia for children and adults, premium 80% employer-paid; 401(k) plan with
the choice of 26 funds from Fidelity; Guardian Life Insurance with 2 times your
Base Annual Earnings (BAE), 100% employer-paid with the option for you to
purchase an additional amount up to 3 times your BAE (subject to certain
limitations) at competitive group rates; Short and Long Term Disability
Insurance from Guardian; Business Travel Accident Insurance, 100% employer-paid;
Flexible Spending Plan; and an Employee Assistance Program through Horizon Care
(EAP). Your benefits under the second sentence of this paragraph (b) may change
at any time, at the discretion of the Company, provided all employees are
subject to the change.

            (c)   The Company shall reimburse you for all usual and ordinary
business expenses incurred by you in the scope of your employment hereunder in
accordance with the Company's expense reimbursement policy as from time to time
in effect.

      4.    Stock Options.

            (a)   You shall be entitled to receive stock options to purchase up
to an aggregate of 2,023,000 shares of common stock, $.001 par value per share,
of the Company. The exercise price under such options shall be [$0.22_] per
share (which is the fair market value of the common stock of the Company as
determined by the Board of Directors at or about the date hereof). The Company
shall use its reasonable efforts so that the maximum number of your options
shall be incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended; the remainder shall be non-qualified
stock options. You acknowledge receipt by the Company of a complete copy of its
Amended and Restated 2000 Stock Option/Stock Issuance Plan (the "Plan"). Your
right to receive stock options shall be subject to your execution and delivery
of (i) an Incentive Stock Option Agreement in the form attached hereto as
Exhibit D upon grant of incentive stock options and (ii) a Non-Qualified Stock

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Option Agreement in the form attached hereto as Exhibit E upon grant of
non-qualified stock options. Your stock options will vest in the manner
described in the option agreements.

            (b)   In addition to the above stock grants, the Company's
management will recommend to the Board of Directors that you be granted a bonus
stock option under the Plan to purchase shares of the Company's common stock of
based on 2002 Product Bookings, determined in the manner described in whichever
of the following clauses (i) and (ii) is applicable:

      (i) If 2002 Product Bookings are between $30 million and $40 million, the
          bonus stock option would be exercisable (subject to vesting) for such
          number shares as would be equal to 0.5% of the Company's capital stock
          outstanding as of December 31, 2002, calculated on a fully diluted
          basis.

      (ii) If 2002 Product Bookings are $40 million or greater, the bonus stock
          option would be exercisable (subject to vesting) for such number
          shares as would be equal to 1.0% of the Company's capital stock
          outstanding as of December 31, 2002, calculated on a fully diluted
          basis.

This bonus option will be granted, if at all, once the total 2002 Product
Bookings are known, in early 2003. The exercise price will be set to the fair
market value of the common stock of the Company as determined by the Board of
Directors in their sole discretion at or about the time of the grant. Vesting
for these bonus options will be in accordance with the Company's standard
vesting terms.

      5.    Severance Benefits. When expressly provided for in this Agreement,
you shall be entitled to "Severance Benefits." The term "Severance Benefits"
means a total amount equal to one half (1/2) your then current annual Base
Salary. The Severance Benefits shall be paid via check to you in the manner and
at the rate that is consistent with the then current payroll policies of the
Company, and shall be subject to all required taxes and withholdings. In the
event that you become eligible for Severance Benefits as provided hereunder,
such payments will terminate upon any breach of your obligations under the NDA.

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